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Economic stimulus

governemnts arond the world have created stimulus packages with the intent of stimulating the economy and keeping people working.

While I can see the value in ensuring that major comanies don't go under and flood the employment market, I can't help but wonder if the packages we've seen are really getting to the root issue.

New businesses create jobs. Small businesses for the main part. What would seem to be a good idea would be to try and encourage more people to start their own businesses.

Here's what I'm thinking:

start a governement fund of a few million dollars - peanuts in the greater scheme of things - and have open application for people seeking money to fund their start-up. submissions would be reviewed by experts in their industry and sucesful applicants invited to present their idea in person.

If a convincing case is put forward, the gov give the entrepreneur a grant towards their start up costs, in exchange for a % share in the new venture. This share can be bought out over time if the business is sucessful.

If more people - particularly those unemployed at present - can be encouraged to go into business for themselves then even if only a small % actually succeed it would be worth it.

jamestkirk | Creator |
11/29/2009 - 4:05 pm

the stats should speak for themselves - small business employes collectively far more people than lage scale coprorates.
I know that whenever free money is concerned there will be political and logistical issues, but to me this seems a problem that can be overcome - if there is the will to do so.
The real way forward as I see it is to emplower people to take better control of their own lives and give them the opportunity to have a crack at operating their own business - provided of course they are serious about it and have a chance of sucess.

phanio | Contributor |
11/26/2009 - 8:17 am

This is already done by our government but with a few twists.
First the government has its own VC fund called In-Q-Tel - the twist, while it does fund new businesses - it only funds companies that provide products and services the government wants - not just any small business.
SBIR/STTR - these are government grants for new or existing businesses - the twist - while it follows what you suggest in your post - it only grants to companies that provide products and services the government wants.
SBIC - and other venture capital type programs through the SBA. The government matches private equity to help fund new, small businesses - the twist, these are run by private companies (with government money) thus you are subject to the whims of the private company, their investment sectors and their investment stage.
SBA guarantee loans - the SBA (part of the government) will guarantee small and new business loans - the twist - local banks still need to underwrite, so you still have to meeet their criteria.
Community Development Grants - the government provides billions in grants every year to small local community businesses. The twist - these grants have to go through your local government. Your local government only provides these funds to companies that provide needed services in the local community (not just every business) or businesses that provide jobs and build local wealth to more people than the founders.
Also, keep in mind that state governments also have many of these same programs. Many state governments have their own venture captial funds - but, just like the national government funds and private funds, they have criteria that must be met. Further, many state governments and local (city and county) governments have grant and loan programs for small businesses as well as community development organziations that may be able to tap the community development funds for local businesses.
The problem is this. If these programs were run directly by the government - they would cost three times what they should, be very inefficient and not accomplish what they were set out to do. Further, providing grant money directly to some small businesses and not to others would be seen as both political and favoritism - things that our elected officals should try to avoid.
Further, imaging the current 22 million businesses in the US applying to the government for a grant as you suggest - they would be overwhelmed and never get to all the applications. Or, the other 300 million people in this country that would fill an application - no one entity could handle that volume - it would take decades to go through all those applications.
Lastly, no one really cares about small businesses - while everyone likes to give them lip service during campaigns - no one really will step up for them. A single small business does not have a voice that can be heard. But, a large company can make a lot of noise. If only small businesses would band together - they would have more influence. Remember, the squeeky wheel gets the grease - A single small business will never be squeeky enough - but together?????????